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Recovery of Shares

Shambhavi Suyesha
| Updated: 11 Jul, 2022 | Category: recovery of shares

Detailed Procedure for Recovery of Shares from IEPF

Recovery of Shares from IEPF
Reading Time: 5 minutes

Any shareholder whose shares, unclaimed or unpaid dividend amount has been transferred to IEPF has the right to claim such shares or dividends from IEPF by following proper procedure for recovery of shares from IEPF.

Introduction to IEPF

IEPF is an abbreviation for Investor Education and Protection Fund. The Government of India constituted it under the Ministry of Corporate Affairs on 7th September 2016. IEPF is constituted under the ambit of sub-section (5), (6) and (7) of Section 125 of the Companies Act 2013, which discusses rules and regulations that are made for investors as well as companies related to IEPF.

It is established to protect the interest of investors who invest in the Share Market of India and whose dividends have been unpaid. When the dividends on the shares are not claimed or encashed for seven consecutive years, then such dividends or shares of the investors are transferred to the IEPF Authority, except for the bonus or split shares of such seven years. Shareholders are suggested to timely claim their dividends and keep track of their funds.

IEPF Authority is responsible for administering Investor Education Protection Fund (IEPF). The Authority revive dormant shares and makes refund unclaimed dividends, matured deposits or debentures and interest to the investors. It is also responsible for spreading awareness among the investors and protecting their interests in the money market.

The investments that become part of Investor Education Protection Funds (IEPF) as per Section 125 of the Companies Act 2013 and all the Rules made thereunder are as follows:

  • Amounts in unpaid dividend accounts of the companies
  • matured debentures with companies
  • matured deposits with companies
  • Application money received by the companies for allotment of any securities and due for refund
  • Interest accrued on amounts in reference to unpaid dividends and matured debentures.

Dematerialisation of Physical Shares

The process of transforming the physical holdings into a digital form is called Dematerialisation. The Securities and Exchange Board of India (SEBI) has forbidden the physical transfer of shares, so this Dematerialisation makes the transfer of shares possible.

Documents required for Recovery of Shares from IEPF

Following documents are required for recovering shares from IEPF:

  • Claim form with the signature of the claimant and in case of joint holders then with signatures of all the joint holders.
  • Copy of acknowledgement bearing SRN number duly attested by the claimant.
  • Indemnity Bond with the claimant’s signature 
  • Advance Stamped Receipt
  •  original certificate of a refund of matured deposit or debenture, or bonds
  • Aadhar Card of the claimant and in case of joint holders, Aadhar Card of all joint holders.
  • PAN Card.
  • Client Master List duly attested by the claimant.
  • Share Certificate
  • Proof of Entitlement
  • Cancelled Cheque
  • Passport, including OCI and PIO card in case of foreigners and NRI.
  • If Joint Holder is deceased, then his death certificate.
  • Other documents, if any.

A verification report as a mandatory document is provided to IEPF Authority by the Nodal Officer or Registrar of the company or bank.

Detailed Procedure for Recovery of Shares from IEPF

The sole purpose of Investor Education Protection Funds (IEPF) is to protect investors’ interests. However, claiming shares or dividends once it gets transferred to IEPF is not that easy for a shareholder. A specific procedure as prescribed by IEPF and related laws needs to be followed to recover shares from IEPF.

An investor whose shares, unclaimed dividend, matured debentures or deposits, application money to be refunded and interest accumulated on the same, sale proceeds of fractional shares, etc. has been transferred to IEPF, then such investors claim their shares under the procedure mentioned under sub section (6) of Section 124 or apply under Subsection (3) of Section 125 of Companies Act 2013 from the appropriate Authority.

If the claimant is a legal heir, nominee or successor of a registered shareholder, then he or she must make sure that the company completes the transmission procedure and an entitlement letter is issued to him or her, then only he or she files an IEPF claim to the Authority.

The Form suggested by IEPF for filing a claim for recovery of shares is Form IEPF 5. However, before filing this Form IEPF 5, a necessary approval from the company or RTA is required to avoid any objections.

Funds transferred to IEPF

The funds that are transferred to IEPF that can be claimed later for recovery of shares from IEPF are as follows:

  • Unclaimed Shares
  • Unclaimed Dividends
  • Unclaimed Debentures of companies and the interest accrued on them.
  • Unrealised Proceeds from matured deposits of companies

Requirements of Form IEPF 5 for Recovery of Shares from IEPF

To claim the shares, this IEPF 5 Form is filed by the claimant. Only one claim is allowed in a year, and if the Form is rejected for any of the reasons, then the claimant has to wait for next year. The Form IEPF 5 must contain the followings:

  • Details of claimant
  • Company details with the CIN number
  • Details of the shares to be claimed
  • The total amount of dividend to be claimed
  • List of the deposits and securities made yearly.
  • Aadhaar number and passport if in case the claimant is NRI.
  • Bank account details linked with Aadhar number for the purpose of refunding the claim amount.

Steps to be followed in case of Recovery of Shares from IEPF

Steps to be followed in case of Recovery of Shares are as follows:

  • An investor who is claiming for recovery of shares first completes its transmission procedure with the company before claiming any of its shares and then files an Application for such shares to the Ministry of Corporate Affairs in provided IEPF Form 5[1] with all the required details.
  • Then the claimant sends the same Form to the Nodal Officer or Registrar of the company along with all required documents. It is sent in an envelope that is marked with “Claim for a refund from IEPF authority”.
  • A verified report is created by the company within 15 days and is sent to the Authority in a prescribed format suggested by the Authority.
  • After proper verification of the claimant’s entitlement, the Authority and the Drawing and Disbursement Officer submit a bill to the Pay and Accounts Officer for payment based on the guidelines.
  • Authority issues a sanction order for refund along with the approval of competent Authority.
  • Shares are credited either to the claimant’s demat account, and if the share certificates are in physical form, then duplicate certificates are cancelled, and shares are transferred to the claimant.
  • The refund is made within 60 days after obtaining the verification report from the company.

Nodal Officer is either a Director, Chief Financial Officer or Company Secretary of the Company. A company may appoint Deputy Nodal Officer to assist the said Nodal Officer for the purpose of verification of claims and to co-ordinate with Investor Education and Protection Fund (IEPF) Authority in the matter of recovery of shares from IEPF. The Nodal Officer is made liable for all actions of such Deputy Nodal Officer. And in the case where the company fails to appoint a Nodal Officer, then every director of such company is considered as a Nodal Officer and is liable for every such failure same as a Nodal Officer.

Conclusion

For recovery of shares from IEPF, an application is filed in the prescribed form, i.e., Form IEPF 5. For the recovery of such shares, the Ministry of Corporate Affairs has introduced Investor Education and Protection Fund Rules, 2017. This Rule is made under Section 125 of the Companies Act, 2013. And as per this Rule, any unpaid or unclaimed dividend for more than seven consecutive years from the date of their declaration is transferred to the Investor Education and Protection Fund (IEPF). However, before applying for the recovery of such shares, one needs to complete the transmission procedure from the company. Once the application is filed in the prescribed Form, the Nodal Officer of the company verifies the claim, and after successful verification, it sends a verified report to IEPF Authority and then the Authority issues receipt as proof of transfer and a sanction letter for refund in favour of the claimant. Then the shares are transferred to the claimant. It is done within 60 days from the date of submission of the verification report from the company to the IEPF Authority.  

Read our Article:Investor Education and Protection Fund- IEPF

Shambhavi Suyesha

Shambhavi holds a strong legal background, having completed her BA LLB and LLM. She is particularly interested in legal research and writing, and wishes to utilise her knowledge to create informative legal content. She is an analytical researcher and keeps herself updated about the current legal affairs. She also holds prior experience in publishing articles on assorted legal areas.

Recovery of Shares

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